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Bill would help consumers close bank accounts

Maybe it shouldn't be a surprise that a proposed Freedom and Mobility in Consumer Banking Act in Congress would mandate that the banking system create clear rules to make closing a bank account easier.

Consumers who are ticked off after waiting too long at the drive-through can skip that fast-food spot the next time. The same is true if you feel disrespected at the dry cleaner.

But what if you're trying to end a relationship with your bank? Do you need a new law to make it easier to leave?

We recently watched Frank Agnew come unhinged as he tried to close his bank account in the finale of AMC's Low Winter Sun, shot in Detroit. The scene gave a clear picture of how insanely frustrated consumers can get while trying to take their money and leave. Agnew spit out how the bank could tack on fees and how he couldn't get his home refinanced while banks held onto their bailout money. Now the teller doesn't know his name, and the process grinds to a halt as he wants his $18,000 out of an account.

Maybe it shouldn't be a surprise that a proposed Freedom and Mobility in Consumer Banking Act in Congress would mandate that the banking system create clear rules to make closing a bank account easier.

The bill would:

• Allow consumers to close an account, regardless of the remaining balance, without a fee.

• Require banks to provide a list of all automated transactions, such as direct deposit and bill payment, to help consumers figure out which transactions to reroute to a new account.

Protect consumers from having old accounts reopened without their consent. This could prevent zombie accounts — closed accounts that can reopen when a third party tries to make a deposit or demands payment from a closed account. Some consumers have complained that overdraft fees might be generated in the process.

"You don't realize the problem until you have to go through it," said Pamela Banks, senior policy counsel for Consumers Union, a policy and advocacy arm for Consumer Reports.

Tom Feltner, director of the Consumer Federation of America, said consumers who face abusive collection practices from high-cost payday lenders also need to be able to easily close accounts to stop unwarranted collections.

Consumers Union's 2012 report, "Trapped at the Bank: Removing Obstacles to Consumer Choice in Banking," stated that despite mass protests and grumbling, many consumers kept their money at the same bank after the 2008-09 crisis because of a perception that it was too hard to move.

But is it too hard? Or are people confused about the fees at other banks, too?

Odysseas Papadimitriou, CEO of CardHub.com, said many consumers may find it overwhelming to try to figure out the best checking account for them.

CardHub's study noted that about 30 fees can be associated with the average checking account.

If you want to close an account, you must be patient, said Alex Matjanec, co-founder of MyBankTracker.com. Consumers must deactivate all direct deposits and automatic bill payments before closing an account.

Many banks offer a switch kit.

"This is the time-consuming part of the process, but if planned correctly, this would avoid zombie accounts," said Martha Peters, senior vice president, DFCU Financial, a credit union based in Dearborn, MIch.

At Bank of America, an incoming transaction won't cause the closed account to reopen, said Diane Wagner, a spokeswoman for BofA. She said associates remind consumers to allow time to make changes to automatic debits and credits, including Social Security checks, before the account is closed.

Chase said its deposit agreement states that the bank may reopen an account if the bank receives a deposit to the closed account. In general, the bank says it does not reopen accounts, but might need to do so to post certain credits that cannot be returned.

Bankers, no surprise, do not welcome added regulation. Some banks and credit unions, including Bank of America, Fifth Third, Chase and DFCU Financial, do not have fees for closing savings accounts or checking accounts.

Jeff Sigmund, senior director of public relations for the American Bankers Association in Washington, D.C., said, "Consumers have many choices in the marketplace, and it's easy to close accounts."

Greg McBride, senior financial analyst for Bankrate.com, said he's not sure regulation is needed because consumers are able to take business elsewhere.

But he warns that consumers could face dormancy fees for inactive accounts.

Fifth Third Bank, for example, discloses that a fee will be assessed if no deposits or withdrawals are made for 12 months for checking accounts and 36 months for savings accounts. The $5-a-month dormancy fee is not assessed if the balance is greater than $2,500.

According to a June report by the Consumer Federation of America, the dormancy fees on a savings account can range from $1 to $12 a month. Often banks might charge that fee if the balance falls below a set level, say between $50 to $500 for a savings account, based on the CFA small sampling.

Leaving a bad banking relationship may not be easy. But if you want to move on with your financial life, be prepared to take time to properly say good-bye.